As if it isn't difficult enough right now to get a home for a first-time homebuyer, Republican legislators want to pass bills that will make it even more difficult.

The Financial Services Committee, which is currently led by the Republicans, would like to raise the minimum down payment for a home purchased through the FHA from its current rate to no less than 5 percent. In addition to that, the FHA-Rural Regulatory Improvement Act of 2011, which is the draft legislation, would also not allow buyers to finance their closing costs.

According to Spencer Bachus, the House Financial Services Committee's Republican Chairman, this bill is coming at a good time because it addresses "government guarantee programs that could expose taxpayers to significant losses."

However, there are many in the mortgage industry who say this isn't the right move right now. The Chairman of the Mortgage Bankers Association, Michael Berman, said that down payments do not always indicate which borrowers are going to default on their mortgages. While the amount of the down payment is one factor in determining a default risk, there are more important factors, such as credit scores, job security and more.

Berman said that the current down payment requirements for FHA borrowers is enough to give the borrower a stake in their purchase. As long as buyers under this program undergo strict underwriting requirements which include income verification and other documentation helps buyers "responsibly become, and stay, homeowners."

Ron Phillips, the President of the National Association of Realtors, also disagrees with the hike in the down payment requirements. He also says that the amount of the down payment is not as accurate of an indicator in loan performance as the underwriting. If the down payment for an FHA mortgage is increased, he believes it would not do anything except "disenfranchise many creditworthy homebuyers."

Still, government entities and legislators think it is necessary to change the down payment requirements and more. According to The Cato Institute, there are several reforms that need to take place in the FHA program in order to protect taxpayers, including the following:

The FHA must allow only reasonable debt-to-income ratios.Borrowers with a credit score between 600 and 680 must undergo pre-purchase counseling before being approved for an FHA mortgage.For borrowers with a credit score below 680, a 10 percent down payment will be required for a home purchase.

In addition to these requirements, the $625,500 mortgage loan limits would become permanent. There is a current limit of $729,750 which is a temporary limit for high-cost areas. This temporary limit is set to expire in September 2011 and the Obama administration has already expressed its unwillingness to support another extension of the temporary limits.

Do you think the mortgages taken out through the FHA should have a higher down payment requirement? Or is it going to make a lot of potential home buyers stay away from the market because they can't come up with the extra 1.5 percent (or more) of a down payment?

While mortgage rates continue to drop, more potential home buyers are taking the plunge into becoming a homeowner. Many of these buyers are becoming a homeowner for the very first time! But it’s exciting to see the number of mortgage loan applications increase which could mean a very small yet significant sign that the economy could be in a bit of an upswing.

The mortgage rates have actually dropped for four consecutive weeks. This has led many to take advantage of the rates while they are still so low. According to statistics, the activity in the mortgage application industry jumped by more than 8 percent last week which shows the eagerness of Americans to realize their dream of owning their own home. Of course, many of these applications are for people already in their home who are applying for a loan to refinance. But those numbers are low because the number of loan requests for refinance is about half what it was at this time last year. Last week, little more than half of the loan applications were for those who wanted to refinance.

As far as mortgage rates go, the average rate for a 30-year fixed rate loan was about 4.63 percent this past week, according to Freddie Mac. That’s almost a tenth of a percent less than they were the week before when they averaged 4.71 percent. However, that’s a full three-tenths of a drop from the 4.93 percent where the mortgage rates stood last year at this time.

For 15-year fixed rate mortgages, you can expect to pay about a 3.89 percent interest rate if you are a qualified buyer. That’s a drop from the 4.30 percent from last year. You can also save money on adjustable rate mortgages. The rate for a five-year adjustable rate mortgage dropped from 3.47 during the previous week to 3.41 percent this past week. The figure for these mortgages last year was 3.95 percent. Some of the lowest rates come with a one-year adjustable rate mortgage. If you qualify and you prefer a short term mortgage like this, you can get rates as low as 3.11 percent which is a small drop from last week’s rates at 3.14 percent. But compared to last year, the 3.11 percent is nearly an entire percentage point lower than the 4.02 percent in 2010.

These numbers represent some of the lowest mortgage rates we have seen in 2011. There are signs that the economy is experiencing a comeback since nearly a quarter of a million jobs were added. However, unemployment rose to 9 percent which is the highest it has been since January.

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It wasn’t too long ago when we saw mortgage rates fall to historic lows. While there has been some fluctuation, rates haven't gone up by much. In fact, they have been falling again. This week’s mortgage rates have dropped for the sixth week in a row.

• For a 30-year fixed rate mortgage, qualified mortgage borrowers can expect to get a rate of about 4.77 percent. That’s a 0.15 percent drop from last week’s rate of 4.82 percent.
• For a 15-year fixed rate mortgage loan, you can expect to pay about 3.95 percent if you qualify for the lowest mortgage rates. That’s a 0.05 percent drop from last week’s 4.00 percent.
• Qualified buyers looking for a 30-year fixed jumbo mortgage can expect to pay a rate of 5.22 percent.
• Adjustable rate mortgage rates have also fallen. For a 5-year ARM, the current average rate stands at about 3.48 percent. For a 7-year ARM, the current rate is just a bit higher at 3.73 percent.

The 30-year fixed rate is at its lowest point in five months. This is a surprising turn of events for many in the mortgage industry who expected rates to increase once the Fed stopped buying mortgage backed securities and wound down its purchase of Treasury securities. For now, several weak economic reports have pushed pushed down Treasury yields, which have reduced mortgage rates. If the economy continued to slog along, rates will remain low.

The looming confrontation over the US debt ceiling is the rate wildcard.. If a pact isn't reached, expect rates to go up in August, when the debt ceiling will be reached and a default will occur. A default is unlikely though. I expect that the government to wait until the last minute, with political brinksmanship ruling the day, before approving the increase in the debt ceiling.

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Have you ever wished that comparing mortgages between lenders and banks was easier? The federal government thinks comparing mortgages should be easier and, as a result, has put a consumer watchdog on the case. That watchdog – the Consumer Financial Protection Bureau – has released an easier way to compare mortgages in a “shopping sheet” format.

In fact, the bureau has released two samples of a “shopping sheet” that lenders would be required to provide buyers when they come to them looking for a mortgage loan. These sheets would need to include information to help compare their mortgage product with other mortgage companies, including the amount of monthly payments, mortgage rates, closing costs and more. In addition to that, this information must be presented in bold type and in an easy to read format rather than the “fine print” that may have been the norm in the industry. These shopping sheets will also be required to have basic information on the first page and then go into more detail on the second page.

According to Elizabeth Warren, the White House and Treasury adviser who was put in charge of this watchdog group, the simpler forms will help home buyers be able to answer some basic questions before they delve into committing to buy a home. Those two questions are: “Is this the best deal that I can get?” and “Can I afford these terms?”

In the current system, mortgage lenders are required to give potential buyers two forms within three days after the buyer applies for a mortgage. These forms include the Truth in Lending form and the Good Faith Estimate document. However, these forms are still confusing for many buyers because of their overlapping information and their cluttered presentation of the information. According to Mike Anderson of the National Association of Mortgage Brokers, these current forms do not tell buyers the cost to expect to pay at closing, which is something that a large number of buyers do not consider when buying a home.

The new forms proposed by the government have a total of two pages as opposed to the current five pages that buyers get now. As a result, the information provided on these new forms should prove to be more concise. They will be tested in a few markets before being released for widespread release. Those test markets include Springfield, MA, Chicago, Los Angeles, Baltimore, Birmingham, AL and Albuquerque. Warren said the bureau is going to consider comments by customers and adjust the sheets accordingly to make them as easy to understand as possible. The testing is scheduled to end in September when the bureau will address the issues that are brought up between now and then and finalize the forms.

Do you think you could benefit from one of these simpler, easy to read forms?

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It is not uncommon for mortgage loans to be sold between companies during the time that you are repaying the loan. Sometimes lenders go out of business or something else happens and they decide to sell the servicing rights of your loan to another company.

When your mortgage loan gets sold, the first thing to remember is that it is normal for this to happen. There is no reason for panic or get worried. In fact, you probably agreed to it in the first place. If you read the documents that the lender gives you before getting your loan, you will probably see in the fine print that there is a possibility that your loan will get sold to another investor during the term of your repayment.

When this happens, the original lender must send you a letter telling you that your loan has been sold to another investor. In addition to that, the investor that is buying your loan must send you a letter telling you that they have purchased your loan. Both of these parties must provide you certain information according to federal law. That information includes the following:

• The original lender, or the one you currently make your payments to, must send you a letter at least 15 days before you have to make your next payment. This letter must tell you in the letter that your loan is being sold. It must also tell you the new investor’s name, the new investor’s phone number, the full address and the name of someone you can speak with at the new investor’s office.
• The investor that has purchased your mortgage loan must send you a letter with the same information – their address, phone number, name of a contact person and any other helpful information you would need in order to make a payment.

The federal government requires that these lenders and investors must do this to avoid homeowners from getting scammed. There was a time not too long ago when scammers were sending letters to homeowners telling them that they purchased their mortgage loan. The homeowners would then send their payments to a post office box when, in fact, their loan had never been sold. The unsuspecting homeowners had no idea that they were being scammed until they received delinquent notice from their real mortgage loan holder.

If you don’t get a letter from your original mortgage lender telling you that your loan is being sold but you receive a letter from another party saying that they have purchased your mortgage loan, start making some phone calls. Your first call should be to your original lender to ask them if your loan has been sold. Your loan cannot be deemed “delinquent” for 60 days while the transfer is occurring so you have time to check the facts and find out exactly what is going on with your account.

Mortgage rates have been hovering around five percent for about two years. But analysts are saying that these rates are not going to be this low forever. In fact, they expect higher rates before the end of 2011. Here are three plausible reasons why mortgage rates could go up significantly before we say hello to 2012.

1. History is a good indicator. If you look at the history of mortgage rates, you will see that today’s rates are not very normal. And the fact that they have stayed this low for so long is even more abnormal form a historical perspective. Mortgage rates have been monitored for 479 months and the rates have been below 5 percent for only 17 of those months. That’s less than 4 percent of the time. Over the 479 months, mortgage rates have an average of about 8.88 percent.

2. Fannie Mae and Freddie Mac as we know them could come to an end. These two government entities have been the leaders in securing mortgage written by private mortgage lenders. But as we’ve seen in the last few years, the way things have been working really have not been working at all. Before the subprime mortgage occurred, Freddie and Fannie were securing loans written that never should have been written at all. As these two institutions begin to wind down, banks are going to be stingier with the loans that they give out. That means higher mortgage rates and tighter credit regulations for those who want to buy a home.

3. Inflation is on the rise. Two years ago in April, the rate of inflation was actually negative. That means inflation had essentially gone down rather than increased. That’s when mortgage rates went below five percent. But today, inflation is over 2 percent. And it is increasing. One of these – mortgage rates or inflation – has to give and it probably won’t be inflation.

Although mortgage rates are probably going to increase in the upcoming year, you shouldn’t jump into the housing market out of fear. Many analysts believe that higher mortgage rates could bring still lower prices, even if the economy is in recovery. However, if you have been planning on purchasing a home, you might shop around before the rates go up.

As a homeowner, you would think that paying off your mortgage would mean that you are done with the mortgage lender. You can have a mortgage burning party and invite all of your friends and neighbors and celebrate the fact that you have removed such a financial load off of your back. But don’t fire up the bonfire just yet. Before you are done with that mortgage, there are some things that you need to do and to keep in mind.

If you signed up for a traditional mortgage loan, you probably signed two main documents – a promissory note and a deed of trust. These documents are usually recorded in your local county clerk’s office. Before you burn your mortgage papers, you should check to be sure that your deed of trust has been released from the land records. In order to do this, you have to file a paper with your county to release the deed of trust. The paper that you have to sign is usually called a certificate of satisfaction and it is much like the document that you receive when you pay off your vehicle. It simply shows that you are the owner of the property and it is free and clear of any other payments.

Some mortgage lenders will file the necessary paperwork to have the promissory note and deed of trust released to you for a small fee (usually around $40 which is well worth the cost because it can save you trouble, time and frustration). Other mortgage lenders will not do this so it is up to you to make sure it happens. If you are left with this task, take the satisfaction notice to your country recorder’s office. It may be called the registrar of deeds depending on your actual municipality. You should get the original paperwork back with a stamp on it that shows the date that you filed. This makes it official.

This process gets more complicated if your mortgage was sold between mortgage lenders during the term of your loan. It could be especially complicated if Bank of America is the final holder of the loan because their mortgage department is wholly inept at managing the mortgage paperwork related to those mortgages that they acquired through the years or that initiated by their predecessor companies. Nevertheless, it is the mortgage lender that holds the loan when you pay it off should be the one responsible for supplying you with the paperwork you need to remove the lien from your home. Unfortunately, that doesn’t mean that you will not need to be intricately involved in the process to make sure that the proper paperwork is filed with your country recorder’s office. After all, it is you and not some junior bank administrator who will need to show that you own your home outright one day.

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